Goldman Sachs Deserves “Capital” Punishment
So, Goldman Sachs stands accused of having pocketed billions from its massive short against the housing market — and lying about it to Congress.
How is it defending itself?
Watch carefully.
Legal Semantics — Not a Denial
The company is not saying, “we didn’t do it” — even though that’s sure what it sounds like to the average listener (no accident).
What they’re actually saying is, “We” . . . “did not” . . . “have” . . . “a” . . . “massive” . . . “short” . . . “against” . . . . . “the housing market.”
Now let’s peel that legal onion, Goldman Sachs-style:
–It depends on what the definition of “massive” is. After all, what’s “massive”‘ to a company with an almost $1 trillion balance sheet?
–We didn’t have a short against the housing market — our investment was in something else, securitized mortgages and credit derivatives.
–And that position wasn’t “short,” it was “long” — long credit derivatives (it just so happens those derivatives appreciated exponentially when housing crashed).
—GOLDMAN SACHS wasn’t short the housing market — our subsidiary/subordinates/janitor was (otherwise known as, “the Fabrice Tourre defense”).
About the only word not amenable — at least as far as I can tell — to spinning or obfuscation?
The word “a” (for more of this sophisticated, silly b.s., see “The Scorpion and the Tortoise Defense“).
Next Steps
I don’t know about you, but personally, I’ve reached a turning point with respect to Wall Street.
Namely, I no longer advocate holding Goldman Sachs and its ilk civilly and criminally accountable.
Too expensive, too complicated, too slow, too . . . futile.
Face it, it’s tough to wrest civil penalties — let alone criminal convictions — from/against a defendant who: a) influenced if not wrote many of the nation’s key financial and securities laws; b) offers regular and highly lucrative employment to the same government officials who would sanction or prosecute it; c) formerly employed said government officials; d) has better and more lawyers — and pays them vastly better — than their government counterparts (no wonder the latter want to work for Goldman Sachs!); e) showers campaign cash (its loose change, really) on the nation’s compliant senior politicians (whom it also employs regularly — in fact, the company hired former New Hampshire Senator Judd Gregg just last month); and f) spends an obscene amount lobbying all the other politicians handling legislation affecting it.
I’m sure I could come up with reasons “g.” through “z.” without trying very hard.
To date, the closest Goldman has come to any kind of real accounting is the $550 million civil fine that the SEC extracted from it last Summer.
As my 6 year-old daughter would say, “Puh-LEEZE!”
“Capital” Punishment
Enough already.
My proposed remedy?
Invoke “The Arthur Andersen solution.”
For vastly smaller crimes (in essence, aiding and abetting Enron), the Arthur Andersen accounting firm suffered the ultimate corporate penalty: it effectively had its license revoked, and went out of business.
Call it capital punishment (the financial kind).
There’s no reason why Delaware, where Goldman Sachs is presumably incorporated, can’t revoke its charter (grounds: public policy and general abuse of the public trust).
And if it won’t, the Federal government certainly can, invoking the Commerce Clause and the principle of preemption.
Prediction: whichever politician campaigns on such a platform is going to get a lot of attention — and votes.
Any takers??
P.S.: Isn’t putting Goldman Sachs out of business “collective punishment” — and therefore unfair to all the good, honest employees who work there? (and in a work force numbering 35,000-plus, I’m sure there are).
On some level, yes.
However, all those employees reaped the benefits of the company’s behavior, in varying degrees.
Compare that to Arthur Andersen, where lapses in just one office (Houston) essentially brought down the entire firm due to its partnership structure (full disclosure: I briefly worked as a CPA in Andersen’s Minneapolis audit department in the ’80’s).
